White Paper: The Way Forward is Restructuring Debt and Massive Infrastructure Project

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“Their second solution involves restructuring the mortgage debt that is crushing so many Americans. It is a complex proposal that involves, for some homeowners, a bridge loan, for others, a reduction in mortgage principal, and, for others still, a plan that allows them to rent the homes they live in with the prospect of buying them back one day.”

EDITOR’S COMMENT: Eventually we are either going to do what this White Paper proposes or we will wish we had. A growing number of economists have been creeping toward the conclusions reached by these brave and brilliant economists who have the guts to dash out into traffic and stop the show.

In a nutshell, the damage wrought by the banks cannot be fixed using traditional means. The proposals here are not mere corrections — they represent a paradigm shift that the banks won’t like. For everyone else — the other 99% — these are practical action items that can be done and must be done if we ever want to see daylight again.

The two main proposals address the main issues confronting everyone who is shaking their head at the dinner table, not knowing which way to turn. A massive infrastructure project is an obvious task that needs to be done and doing it now will lift the economy and the American spirit. A complex massive shift in the relationship of debtors and creditors, winding down the crushing debt on the young who were forced and lured into lurid student loans, and winding up the debt and title mess created for nearly all homeowners in the country will fix most of what ails us.

If we don’t follow this path we will see our bridges and tunnels collapse doing more damage and taking more lives than anything any terrorist has ever done. If we don’t restore the middle class it will be gone, along with the long cherished American way of life. So the answer is obvious: stop talking about cutting the deficit, which is just an idea, and get people to work rebuilding those parts of our country that are collapsing. And stop talking about personal responsibility and blame, which is just another idea, and get money into the hands of those whose spending will revive the economy. Return hope to the people and they will return the favor for each other and the country as a whole.

Normally I would dismiss this paper as pie in the sky wishful thinking. But with Occupy Wall Street spreading to nearly a thousand towns and cities across the country, including Hawaii and Alaska, the operative word is “traction.” Maybe the Banks did us a favor. Because we can now get together and come together in one purpose — to require those who have been depleting our human resources to give us our life back again — Now.

This Time, It Really Is Different

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The title of the white paper is, admittedly, a mouthful: “The Way Forward: Moving From the Post-Bubble, Post-Bust Economy to Renewed Growth and Competitiveness.” It was commissioned by the New America Foundation, which hoped that it might “re-center the political debate to better reflect the country’s deep economic problems,” according to Sherle Schwenninger, the director of the foundation’s Economic Growth Program. Its authors are Daniel Alpert, a managing partner of Westwood Capital; Robert Hockett, a professor of financial law at Cornell and a consultant to the New York Federal Reserve; and Nouriel Roubini, who is, well, Nouriel Roubini, whose consistently bearish views have been consistently right. It is scheduled to be released on Wednesday.

I don’t know that anything at this point could re-center the political debate, so unyielding are the two parties. But as Congress prepares to take steps, through the deliberations of the already deadlocked supercommittee, that will likely further wound our ailing economy, “The Way Forward” ought to at least give our politicians pause.

Its analysis of our problems is sobering. Its proposed solutions are far more ambitious than anything being talked about in Washington. And its prognosis, if we continue on the current path, is grim. “Unless we take dramatic steps, it will be Japan all over again,” says Alpert. “Continuous deflation, no economic growth, in and out of recessions. And high unemployment.” Adds Hockett: “It will be like the economic version of chronic fatigue syndrome. A low-grade fever all the time.”

The paper’s central premise is something I’ve been hearing from Alpert for more than a year now: this time, it really is different. What he and his co-authors mean by that is that the bursting of the debt bubble three years ago was not just a severe example of the ups and downs that are an inevitable part of American capitalism. Rather, it was the ultimate consequence of the modern global economy. Chief among the changes that have taken place is the integration of China, Russia, India and other countries into the global economic mainstream. The developed world once had maybe 500 million workers. Today, say the authors, we’ve added another two billion people to the global work force.

That change alone has had a great deal to do with the stagnant wages, income inequality and the oversupply of labor in America that was masked by rising home prices and access to credit. The bursting of the bubble exposed how much the American economy depended on cheap credit. Now that the curtain has been pulled back, cheap credit alone can’t fix our problems. The country is in a deflationary cycle that is very difficult to get out of: as wages decrease (or more workers become unemployed), people become afraid to spend. Assets like homes drop in value. Businesses react by lowering prices and laying off yet more workers — which only triggers a new round of deflation. The only thing that doesn’t change is the unsustainably high debt that was accrued during the bubble.

How can we break this cycle? Like most mainstream economists, Alpert, Hockett and Roubini roll their eyes at the calls for immediate government deficit reduction, which led to the creation of the supercommittee. Reducing government spending in the short term will only make things worse.

Instead, they believe that this is perhaps the best time in recent history for the government to take on a sustained infrastructure program, lasting from five to seven years, to create jobs and demand. “Labor costs will never be lower,” says Hockett. “Equipment costs will never be lower. The cost of capital will never be lower. Why wait?” Their plan calls for $1.2 trillion in spending — not all by the government, but all overseen by government — that would add 5.2 million jobs each year of the program. Alpert says that current ideas, like tax cuts, meant to stimulate the economy indirectly, just won’t work for a problem as big the one we are facing. Indeed, so far, they haven’t.

Their second solution involves restructuring the mortgage debt that is crushing so many Americans. It is a complex proposal that involves, for some homeowners, a bridge loan, for others, a reduction in mortgage principal, and, for others still, a plan that allows them to rent the homes they live in with the prospect of buying them back one day.

Finally, they call for a “global rebalancing,” which includes a radical change in the current dysfunctional relationship between creditor and debtor nations, and even a new global currency that would be administered by the International Monetary Fund.

It is impossible to do justice to “The Way Forward” in this space. It is rich in supporting data, deeply nuanced, with as clear-eyed a view of our economic predicament as I’ve ever read. Though it is not exactly beach reading, by academic standards it is quite accessible.

You can find it at http://newamerica.net/publications/policy/the_way_forward. You should read it — even if your congressman doesn’t.

14 Responses

  1. […] See original article: White Paper: The Way Forward is Restructuring Debt and Massive Infrastructure Project […]

  2. It amazes me how most people never stop to think about common sense.
    Saying that the U.S. needs another big infrastructure project is like saying that your alcoholic neighbor who is in debt up to his ears can get out of debt by upgrading his house top to bottom. Even if he can borrow the money for the project, where will the money come from? Hint: the taxpayer, who is . . . in case you didn’t notice . . . already broker than broke.

    And what is all this talk about deflation? The problem is not that wages and asset prices are coming down, but that they went up in the first place, especially the way that they did. Real estate prices are still way too high, especially when you consider the intrinsic value of the average American home, built of . . . cardboard. And so are wages, especially government wages. In some sectors,private wages are only about 60% of comparable government wages. If that is capitalism, then G.W. Bush is a ballerina…

  3. What if we get the relentless threat of the roof over our heads removed – like a hat too tight that is taken off our heads – strangling us – so we can think and breathe again – funds advanced to payoff (reasonable – not mcmansions – up to maybe $250,000) – then we have our roofs safely protecting us so we can move forward – we would pay the taxes on the amount which would infuse money into the government and the government can then take up the fight with wall street and pretender lenders – it’s cheaper if they collectively go after these financial entities on their own – instead of 65 million attempting to litigate – it is more likely if the government takes up the legal actions and fights they will win – and they will get the money back – as well if we pay taxes on the amount that will help finance the projects – and will give us money to put back into the economy – thus it is not a ‘free house’ for anyone – and the homeowners get to live with their families in the shelter they are now in. When things have settled down in a few years then we can maybe re-visit issues of perhaps making payments that were forgiven – after we’ve had a chance to catch up and have an idea where and how we stand without the relentless 24-7 threats of our homes being stolen by strangers.

    It goes to reason if we never pay it back, so be it – we’ll then consider the amounts as part of the ‘trickle down’ bit that never happened with the bailouts – we create our own trickle down effect – we should have been individually given the money anyhow in ’08 – not the banks – it would have been our decision to determine which bank, credit union, etc. was to survive because we would have deposited those sums to reduce or clear mortgages, etc. – it would have been ours’ – the taxpayers’ decisions – what financial entity was to survive or not – they would have fought for our business – not the federal reserve’s.

  4. Yesssss Nora C!

  5. This is dangerous “New World Order” crap. We need to break the strangle hold of the plutocrats by restoring America’s sovereignty, not give them complete power and control over us by implementing a money supply they control exclusively!
    The IMF and the BIS need to go! Cut off the head of the monster by ENDING THE FED. They have brainwashed the financial sector into thinking they are a necessity, when in fact they are the creators of every financial depression, recession and market downturn. If they could really do what they claim, which is to stabilize and insure the economy’s health, they’d have done so! What they actually have done is bring not only our economy, but the world’s economy to the brink of disaster through manipulation of the money supply.
    What we need is a fundamental reevaulation of our money mechanism. Once we do that, a return to sound money and the Gold standard will follow, since those solid American principles allowed us to become the great nation we were, until the creature from Jeckyll Island was allowed to creep in to destroy everything we worked to build. We now work to provide profit for them, in unfathomable amounts, at our expense while surrendering personal freedom, liberty and privacy.
    The statements made in this report are just more propaganda, aimed at influencing us into going along with their plan, despite clear evidence that plan will result in disaster for the 99%. The far-reaching tentacles of the Creature need to be chopped off. Central banks are destroying the world through a subtranet that won’t let go easily; the urgent need to act–to kill the banks–needs to be our only priority. Jobs and growth will return as we resourceful Americans throw off the oppression of occupation by the Central banksters. The huge debt we’ve been conned into shouldering should be disputed! The fruits stolen by the bank’s Ponzi scheme should be returned, and the perpetrators who have ruled in secrecy and collusion, (Jamie Dimond, Timothy Geitner, Alan Greenspan, Henry Paulson, Ben Bernanke, and the list goes on…) need to pay it back. The revolving door at the DOJ needs to be taken off and replaced with a TSA screening booth. Until we put financial criminals in jail like every other type of real criminal, we will never be a great country based on justice and law again.

  6. “Infrastructure” is code for “more government spending”. What? High speed rail? Trolleys? Hybrid buses that don’t operate as hybrids? Oh my god, hasn’t the government done enough? The infrastructure is there, and soon we won’t be able to use it because the EPA is on the march to 25 mpg for semi-trucks weighing 80,000 pounds! What do you think THAT will do to shipping costs? How about when they make it illegal for cows to fart? The farmers will have to hook hoses up to the cows’ ass and reclaim the methane! What do you think that will do to milk prices? You’re already burning your corn crop while the ethanol fraud perpetuates itself, raising food prices around the globe!
    We’re not going to build our way out of it through taxation!
    Now there are two problems directly attributable to Dums and Repubics. Where’s the middle ground? There isn’t any. They are both DISTRACTIONS. The New World Order (not the band, dummy) is coming to a town near you. World wide socialism is being preached, redistribution of wealth, make it fair. But YOU will never advance your position.
    Herman Cain is really a showman, because he’s going after the tax code as cover to the fact he’s entrenched and will be beholden to the banking lobby. I know he appears to be bucking the establishment Repubican party; there is no victory to be had for any of these guys (nor Obama or any other Democrat of “power”) by throwing the banks under the bus. Too much money, too much power. And the FDIC won’t, uh, can’t, uh, oh. They’re in on the deal, pal. This is “Chicago Way goes to Washington”, and nobody can stop it. The Constitution is burning in the alley somewhere in Hyde Park, while the Daley brothers chuckle about the whole thing. Big brother Bill will say to Little Dick: “We did good, didn’t we?”, while snorting a couple of brandies.
    The problem is that the Feds are looking at everyone the same way; first: that WE’RE STUPID! And whether it’s a family that was trying to buy a house for HOUSING, or an investor who borrowed all the cheap money he could to become the next Donald Chump, eveybody’s a liar! THE BANKS WILL BE PROTECTED AT ALL COSTS! And that includes the big national home builders and appraisers. They’re all in on the deal.
    Hopefully more judges will step up and say “Whoa!! You’re speeding, counsel! Who is the creditor? Where is the note and mortgage? Assignments? And, where’s the ledger?”
    It’s up to you to find and hire competent counsel. Attorneys and judges are running out of places to hide, and are realizing the truth. It’s going to be hard for them to save face if the word gets out.
    And harry, thanks for keeping us grounded. This place goes way, way, way way out there sometimes.

  7. Hard to believe that I read this post on Neil Garfileds site. This “paper” alludes to a “new currency” being issued to rectify the devaluation of the dollar and to “write down” these securitized fraudulent mortgages or allow the home OWNERs to rent it back with a scant promise of the “possibility” of owning it again ~ when in reality THEY STILL DO AND ALWAYS HAVE, as they are THE ONLY ONES WITH A VESTED INTEREST IN THAT PROPERTY OTHER THAN THE INVESTORS THAT WERE SCAMMED ALONGSIDE THEM AND THAT CANNOT OR WILL NOT CLAIM OWNERSHIP.

    This whole article echoes bank sympathies as well as a hint at bringing in the long awaited Amero currency between all three countries linked through the Rick Perry supported trans Texas corrider. Which in and of itself is a NWO agenda, not to mention the whole supposition that we somehow still owe these parasitic bankers ANYTHING OR ANY MONEY ~ whether it be in dollars, euros or their long awaited and much coveted Amero.

    We stopped owing them the MINUTE they took our largest asset, our home, and traded that asset as a stock. They bifurcated and clouded our titles so that we can never sell that property unless we spend the thousands of dollars it will require to Quiet our Titles. We stopped owing them ANYTHING when they deliberately set out to destroy all vestages of a strong economy with their financial “WMD’s” (weapons of mass destruction) that killed hundreds of job sectors like real estate agents and brokers, property inspectors, appraisers, property investors, etc..etc.. Weapons that they paid Yale & Harvard finance and business scholars to design so that no ordinary person would ever know what they were signing or what powers they were embuing these entities with, or themselves losing.

    This is not a banking scandal ~ this is OUT AND OUT WAR. It started with the weapons of mass destruction called securitized assets and REMIC’s and mortgage derivatives, and now it continues with psychological warfare on all the homeowners whose lives are tied up and entangled in the day to dayness of having to wonder what to do next to keep these vultures from descending upon them and depriving them of thier life’s blood, sweat and efforts with the stroke of a key and and a pen, and thereby evicting them from their homes. It continues when the supposed “Justice System” is so corrupted that no matter how much evidence is presented they still side with the bankers. It is a non stop onslaught of financial and psychological warfare. WHEN DO WE WAKE UP AND CALL THIS WHAT IT REALLY IS???

    It makes me want to scream when I read crap like this. What reality are they living in???? I live in the reality that a lie is a lie is a lie and a thief will always be looking for ways to steal from you. And until we all unite collectively and stop accepting these piece-meal solutions that seem to ALWAYS leave the PTB still in power, then we are truly doomed to lead our lives like the sheeple they love to call us and compare us to.

    When we all wake up ~ and I belive we will ~ we will insist with strength, clarity and in unison ~ that we are no longer their slaves. We are a free people and that freedom cannot be dictated by ANY government or ANY banking cartel. And our inherent freedom which comes from simply BEING also includes the right to OWN our own property and land that we have earned with our own sweat and labor and TIME. And NO MAN or ENTITY can take this freedom away from us unless we ALLOW it and VOLUNTARILY give our permission for them to strip us of that right.

    Which is EXACTLY why we have PROPERTY TAXES and INCOME taxes. BECAUSE WE ALLOWED IT. Now is the time to stay our course and demand that these RIGHTS be ACKNOWLEDGED, RESTORED, OBSERVED AND PROTECTED. And this all starts with me & you, right now. Each and every one of us has a duty to stand up and rightfully demand that those entities that would propose to continually interfere in our G-d given rights, be dismantled, abolished and where criminal charges are appropriate, imprisoned.

    Enough is enough…..

  8. “Again, I believe the next big thing, for when (not if, but when) European banks blow up, is the reverberation through American banks and how it WILL affect us stateside!”

    http://boombustblog.com/BoomBustBlog/Why-Occupy-Wall-Street-When-You-Can-Control-Wall-Street.html

  9. Right on FRAUD FIGHTER!!! It’s all or nothing—and they did it to themselves…and they MUST pay…

    We have to get money out of politics—the bribes and payoffs and super-pacs and secrecy of where our money is going HAS TO STOP!!!!

    PLEASE sign the petition and keep the “wave” going if you haven’t already!!

    http://www.getmoneyout.com

    SOOOOOOOOOOOOOOO IMPORTANT!!!!

  10. If you still have accounts in CitiBank, JP Morgan Chase, BofA, Wells Fargo, Wachovia, Bank of NY Mellon or any other mega bank, move your account to another smaller local bank or credit union. Put them out of business. All they do is steal and lie so why support them.

  11. The only way to save the USA will be to jail those who put us in harms way. It starts with Phil Graham, Bill Clinton, and Greenspan. Strip their assets and pension plans. They promoted the destruction and financial terrorism. This is no different than Sudden Husain dropping chemical bombs on his own people.

    OCCUPY WALL STREET
    ———-REMOVE the WRECKING CREW from the WHITE HOUSE & the FED ——-

  12. STOP BLAMING THE HOMEOWNERS AND TREATING US LIKE THEY ARE DOING US A FAVOR.

    It’s the Banks who did it all wrong and they should take the hit on their profits 100%. All the mortgages should be erased. That will give everyone some equity. This, in itself, should stimulate the economy and it puts the American people in control. If the big banks fail, that is their problem. They created this problem 100%. Instead of watching 1000’s more community banks fail, its the big ones that can pay for all the problems they created and all the small ones may be able to flourish.

    The idea above turns all the American people into puppets under their control. It is like they are doing us a favor.

    The facts are-because of their greed and what they did with our notes, we don’t owe them anything. The Banks, including the wonderful FNMA and FREDDIE MAC has done this to the American people because of greed and we should be the ones in control of our homes and real estate and not them.

  13. Global re-balancing…Hmmmmm…that’s a lot to swallow and the Federal Government over seeing it?

    The U.S. Government is also “too big to fail” if you can coin the phrase. Our government is riddled with corruption, payoffs/bribes, rewarding poor performance and behavior and passing legislation that under minds the entire citizenry. I disagree with creating an new infrastructure the Federal Government manages or oversees.

    The way I see it…real estate needs principle reductions across the board, as the inflated values need to be reconciled, as they were false to begin with and the banks have been compensated accordingly. Next; we need incentives to create jobs, not an infusion of cash, without regulation and oversight. You can see the end result with no one watching where the money is delegated and used.

    Tax incentives work better. They create an environment of relief for the corporation. In incentives to supply jobs, you form a tax base, not only in the Federal system, but the State locales, where buying locally and living in an area creates its own growth potential and a much more stable tax base.

    The United States can manufacture and produce everything we need at a cost below or equal to any other country. We have every resource here. The illusion others do it better and we need to buy imports is a lie and been perpetuated again by our own Government. The trade agreements must be looked at. They are unfair to Americans and are irrelevant to our growth, quite the contrary, they are negative to every facet of labor and development in this country.

  14. The FASTEST way to get money into middle class hands would be for the fedgov to acknowledge what it already knows to be true , that there are massive problems with the real estate (loans/derivatives) they bought from the banks ,, create a commission to address the issue and order a moritorium on mortgage payments for 6 months until it can be determined if your particular loan is already paid off or not.

    This is a worldwide crisis , Europe and China are in worse shape than us … because of central gov’t manipulation over the last hundred or so years… Saving the USA by fixing our derivative inspired kluge will kill the foreign banks owning these bad contracts … but it has to be done.

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